Detroit follows Peoria pattern'

Friday

Sep 28, 2007 at 12:01 AMSep 28, 2007 at 3:59 AM

Editorial "Detroit follows 'Peoria pattern," about the new General Motors Contract being reminiscent of the deal Caterpillar inked with the UAW a decade ago in which the Peoria-based manufacturer officially broke from the "pattern bargaining" model established by the Big 3 automakers.

Those of us old enough to remember the 1990s in these parts will also recall that you couldn't turn a corner without seeing or hearing the United Auto Workers' battle cry, 'No contract! No peace!' What that meant for a UAW member picketing in front of a Caterpillar plant or company headquarters was really 'No pattern! No peace!'

Indeed, so-called 'pattern bargaining' was on seemingly every lip. Whatever union workers negotiated in concessions from the Big 3 auto companies — General Motors, Ford, Chrysler — little Caterpillar was expected to deliver, as well. That's the way it had always been, and the way it would always be.

That is, until Caterpillar management decided it was time to break the pattern and that 'global competitiveness' would be the new watchword. It would introduce some other new terms, too, like 'two-tier wages' and 'voluntary employee benefit association,' VEBA for short, to help pay retirees' health care costs. Ultimately the company prevailed following more than six years of labor unrest, including two strikes. A new pattern had been forged.

It has taken Detroit more than a decade to catch up with Peoria, but this week General Motors, at least, appears to have finally arrived at Caterpillar's doorstep, reaching agreement following a two-day strike on a contract that reportedly contains two-tier wages and its own version of a VEBA. Call it pattern bargaining in reverse, or pattern bargaining, 21st-century style, GM now seems to be emulating Caterpillar, not vice versa. No one will be surprised if Ford and Chrysler attempt to follow suit.

Certainly Caterpillar has been far more successful than all of the above over the last decade, raking in record profits and holding or gaining market share while the Big 3 hemorrhaged red ink, watched their stock prices plummet and got hammered by Asian competitors such as Toyota and Honda. Brand loyalty isn't what it used to be, and neither is the leverage of unions. If GM employed 200,000 UAW workers a decade ago, today it's 73,000. Reportedly this contract promises those workers job security for the next four years and investment in U.S. plants. In many ways, the UAW leadership's acceptance of it — the rank and file has yet to weigh in — is a recognition of those realities.

That includes recognizing that their employer's legacy costs are real, that GM might never come back unless it found some way to get its $50 billion liability for retirees' health care off its books. Hence the creation of the VEBA, an independent health care trust to be funded by the company, run by the union. That's what broke the logjam.

There's no guarantee the VEBA will work. Again, Peoria's experience — been there, done that — could be instructive. While different in structure, the local VEBA was tapped out in just six years. If today's new buzz word is 'nimble,' it's hard to be nimble when health care costs so weigh U.S. corporations down in a business environment that is more global than ever.

If universal health care ultimately comes to America — some would call it 'socialized medicine' — let us predict that it won't be out of some moral imperative but from U.S. companies simply deciding to get out of the health-care business because they can't remain competitive otherwise. Good or bad, the situation is what it is.

At any rate, this contract may represent the first rung of GM's climb back. Many of us will be watching what patterns emerge from it. Certainly a two-day strike beats six years plus of labor strife, which is one Peoria pattern Detroit is no doubt glad to dodge.